Technical Report: The Business Case for Healthcare Information Technology in Nursing Homes

We investigate whether the implementation of electronic medical records is associated with higher levels of economic performance in nursing homes in terms of quality, profitability, cost, productivity, and efficiency. Our analysis is based on a survey of Healthcare Information Technology (HIT) usage for approximately 200 New York State Nursing Homes, including 26 that participated in the NY Nursing Home Demonstration project. The survey data are combined with regulatory data from CMS Nursing Home Compare and the NY State RHCF-4 financial reports. The analysis uses a “difference in differences approach” comparing changes in economic performance in a facility before and after HIT implementation to changes over the same time periods in other facilities that are known to not have implemented HIT. Overall, we do not find conclusive evidence that adoption of HIT raises productivity, increases commonly used performance measures, or improves quality scores in the short run. There is some evidence of a positive effect after several years. We do find that there appears to be a slight increase (1-3%) in variable costs, but also slightly greater efficiency when measured by frontier analysis. However, facilities that adopt HIT and either adopt or have in place progressive work practices (which include greater staff autonomy, cooperative labor-management relations, and greater teamwork) consistently show performance gains. Firms that are one standard deviation higher on our progressive work practice score get a 2-3% increase in productivity, a 2-3% reduction in costs and a 1-2% incremental efficiency gain upon adoption of HIT relative to their peers.Our results suggest that adoption of EMR can have significant positive economic benefits when implemented in conjunction with progressive work practices.